5.3. ERMUSR 05-08-2012Elk River
Municipal Utilities
13069 Orono Parkway
EIk River MN 55330
(763) 441-2020
UTILITIES COMMISSION MEETING
TO: FROM:
Elk River Municipal Utilities Commission Troy Adams, P.E. -Utilities Director
John Dietz -Chair
Dazyl Thompson -Vice Chair
Al Nadeau -Trustee
MEETING DATE: AGENDA ITEM NUMBER:
Ma 8, 2012 5.3
SUBJECT:
Discussion of Public Offices and Conflict of Interest Pertainin to Contracts
DISCUSSION:
There has been recent inquires by the members of the Utilities Commission regarding the ability
_ to submit bids for work or materials needed for the operation of the utilities. With a few explicit
exceptions, under Minnesota Statute it is prohibited for any public officer who is "authorized to
take part in any manner in making any wale, lease, or contract in official capacity" to have a
financial interest in those actions. The exceptions would be limited by dollar amount and require
a documented procedure and a resolution by the governing body.
ACTION REQUESTED:
Staff requests Commission direction on whether or not to further research this topic and develop
a procedure for future Commission approval.
ATTACHMENTS:
• Minnesota Statutes 471.87 - 471.89
Guidelines from the League of Minnesota Cities relating to Public Officers and Conflict
of Interest
~r$ r~,,ogw/~teto er
1 tlH~V~~
Reliable Public
Power Provider a ~~ w i v r o i s s e A
W
Mi h~esa~- ~~}~
§ 471.87
JNICIPAL RIGHTS, POWERS, DUTI
nstrued to waive any existing imm ty accorded by law to municipalities or
vertlmental subdivisions from clai s Eor damages sustained as the result of
;negligence of its officers, agen or servants in the exercise or performance
governmental or public functio s.
ws 1951, c. 183, §§ 1 to 3. Am ded by Laws 1957, c. 199, § 1; Laws 1973, c. 123,
L 5, § 7; 1977, c. 429, § 63; L s 1986, c. 444.
H torical and
fie ]957 amendment in sub 2 substituted
tch governmental subdivisio shall appropri•
money from any funds av 'able to pay such
Igmenq or shell levy tun for the payment
xeof pursuant to law" for "such govermnen-
subdivision is authorize in iss discretion, to
propriate money from y Funds available to
y such judgment".
Laws 1973, c. 123, . 5, § 7, was a general
n6,..ivarinn Eor the c solidation of the terms
Statutory Notes
"villages" and "boroughs" into the term "cit-
ies" or the substitution of the term "statutory
cities" for "villages" and/or boroughs."
Laws 1977, c. 429, § 63 instructed the revisor
of statutes m change the terms "fireman" and
"firemen' tc "frfefighter" and "firefighter" re-
spectively, where appropriate.
The 198fi amendment authorized the removal
of nonsubstantive gender specific references.
nagex: ,;, Cross References
road~T
1962. =i .Governmental tort abIl]ty, see § 466.02.
°i~. ~ Indemnification of fficers and employees, see § 466.07.
5e lp +
rider- Library References
Gen:, Municipal C rations X199. C.7.S. Municipal Corporations §§ 535 to 538,
Westlaw To c No. 266. 542, 544 to 546, 558 m 561, 565, 568 to
on of _~ 569.
sons]
cider- Research References
.Gen-,
TrcatLses d PraMlrc Aids
17A M' esota Practice Series ~ 466.07, In-
de cation.
other
any Notes of Decisions
:tion5 Criminal ~~ 2 therefrom, volunteer paid firemen while on ec-
7n oY yol~ firefighters 1 five duty aze within the purview of these stamm-
,On of ry provisions. Op.Atty.C,en., 249-B-8, April 25,
d pay 1958.
nmsel 1. Volunt r I3reflghteta
Having in m]nd public policy implicit in 2. Crlminal charges
)E any §§ 418.11, 4 42, 471.43 and this section to
protect against a specified risks of those per- A county could not reimburse deputy sheriff
Forming govemm tal services on behalf of po- for legal expenses in connection with the de-
favor kfical subdivisions, d to protect individuals fence of a criminal charge. Op.Atty.Gen.
ned to from specified injurie d damages resulting 125-A-25 (Iuly 28, L960) 1980 WL 119580.
lected
•, such 471.$7. public officers, intetest in contract; penalty
tble to
o law. Except as authorized in section 471.88, a public officer who is authorized to
in any ta)se par[ in any manner in making any sale, lease, or contract in official
mages capacity shall not voluntarily have a personal financial interest in that sale,
not be
613
"- ,~~ol~.fi~ ~ ~~ ~v~ ~5 ~ grim ~~e- S~~
E' av'e 1~,~1~ ~ I ~ tr-i- ~ ~o~ 5 ~ y ~17 w, '~, i
'. I § 471.87 MUNICIPALITIES
(I
I'.
lease or contract or ersonally benefi nancia ly therefrom Every public
~~ I officer who violates this provision is gu o a dross misdemeanor.
j i Laws 1951, c. 379, § 1. Amended by Laws 1955, c.
C.
1 ', Historical and Statutory Notes
Derivation: Rev.Laws 1905, § 5032.
St.1949, § 620.04. Gen.St.1894, § 6666.
- Laws 1941, c. 228, § 1. Pen.Code, § 372.
Laws 1931, c. 212. The 1955 amendment deleted "other" follow-
. St.1927, § 10305. ing "any sale, lease, or".
Gen.St.1923, § 10305. The 1986 amendment authorized the removal
Gen.S[.1913, § 8817. of nonsubstantive gender specific references.
Cross References
Area redevelopment agencies, see § 469.109 et seq.
County commissioners, see § 375.09.
County officials, sce § 382.18.
Gross misdemeanor, punishment when not otherwise provided, see § 609.03.
Highway department employees, see § 161.33.
Merchandise not to be purchased from state agencies by public employees, see § 15.054.
Statutory cities, council members, see § 412.311.
Town officers, see § 365.37.
Law Review and Journal Commentaries
Constmctive trusts. Edwazd G. Jennings and Sale of merchandise to city by member of city
Irving S. Shapiro, May 1941, 25 Minn.L.Rev. council. April 1936, 20 Mitm.L.Rev. 564.
667, 691. Sales to public employees. Jan. 1942, 26
Interest of public officer in municipal can- Minn.L.Rev. 222.
tract. Jan. 1939, 23 Minn.L.Rev. 239.
Municipal corporations, right of taxpayer m
enjoin or avoid a contract Feb. 195 i, 35 Minn.
L.Rev. 322.
Library References
Officers and Public Employees 4=+110. C.J.S. Officers and Public Employees §§ 234
Wesdaw Topic Nv. 283. to 24i
Research References
ALR Library Necessitating Disqualification of Officer or
4 ALR 6th 263, Hias or Interest of Administra- A[fecting Validity of Zoning Decision.
five Officer Sitting in Zoning Proceeding as
Notes of Decisions
Iu'general 1 Health services 25
Banks 15 Husband and wife 12
Car deniers 23 insurance 17
~! Charter provisions 3 Judges 27
Children l3 Licenses 29
~._ Competitive bids 22 Municipal liquor stores 24
{{ Construction contracts 18 Official capacity 7
E'~ Eflect of resignation 5 Penalty 10
t' Effect of void contracts 9 Personal financial interest 11
t Eminent domain 26 Public officers 4
Employment by government units 20 Purpose 2
!1 Firefighters 19
I Real esmte transactions 16
'' 614
MUNICI]
Resigmtion
School van
Shareholdea
Surety 21
Yoid contra•
In gene
Effect o
Vote by Inle
1. Iv gene[
Public, in
entai]s a a;
officer, rein
public polic
either duec
concerning:
officer or a
fairness or i
whether the
thereby. C.
1913, 122 b
Cas. 1914D,:
Independt
ing member
upon matter
[erected, but
municipal of
capacity, or
Atty.Gen. 46'
In order E
sential elemt
den therein
90c-5, Tan. 1
2. Purpose
Where cir
established d
within the n
section, may
with the city
§ 471.88. C
The manif
prohibit coot
financial inb
benefit finan
was designed
interest and
273a-17, Sep
City officio
from and se
course of bus
chases were:
tint action c
No. 115, p. b
3. Charter p
Under city
officer from F
contract wit}
council could
§ 471.87
Note 22
the bid of such alderman was substantially low-
er than that of the other bidders on the same
vehicle. Op.Atty.Gen. 90-E-5, May 1, 1952.
23. Car dealer
Automobile dealu could sell a police caz to a
city despite the fact that one of his employees
served on the city comcil provided that the
councilman did not have a financial interest in
the sale of the car or personally benefited there-
from. Op.Atty.Gen. 59a-29, Apri121, 1967.
24. Muoicipal liquor stores
Village councilman may not sell merchandise
to a municipal liquor store if he has any power
in his official capacity over the details of the
operation of the store. OpAtty.Gen. 90a-1,
April 13, 1961. .
Village councilman could sell merchandise to
a 3.2 beer licensee of the village, but should not
act o$icially upon matters affecting the licensee.
Op.Atty.Gen. 90a-1, April 13, 1961.
25. Health services
Where city health officer was employed at a
fixed salary and as such officer was a member
of the city boazd of health, a wntract by officer
with the boazd that officer should render ser-
vices in controlling an epidemic in the city and
be paid the reasonable value thereof was void.
Bjelland v. City of Mankato, 1910, 112 Minn.
24, 127 N.W. 397, 140 Am.St.Rep. 460. Health
e= 365
A town or village boazd of health, one of
whose members was a practicing physician and
surgeon, could employ such physician to act for
the boazd in all matters requiring such services.
Appeal of Board of Health of Village of Bullalo
Lake, 1903, 89 Minn. 402, 95 N.W. 221. Health
oa 364; Health ~ 366
26. school tramlwrmtion
Parents of children who furnish transporta-
lion to a school in a district other than resi-
dence of pupils may be compensated for trans-
portation if a valid contract has been entered
into with school district, but, such a contract
~~ 'could not be made where parent is ako member
of school board or a clerk in common or inde-
pendent school district. Op.Atty.Gen. 90-C-7,
MUNICIPALITIES
27. Judges
Appointment of judge of election is an admin-
istrative act of an administrative body and is not
a "sale, lease, or contract" within coloring of
provision of this section that, except as author-
ized in 5 471.88, a public officer who is author-
ized to take part is any manner m making any
"sale, lease, or contract' in this official capacity
shall not voluntarIly have a personal financial
interest in that "sale, lease, or contract" or
petsonally benefit financially thereunder. OP.
A[ty.Gen. I67-A-b, May 24, 1955.
28. Emimnt domain
Where a councilman owns a third-interest m
a building scheduled for acquisition and demoli-
tion as a result of a development distrct project
fnstimted by the city under the provisions of c.
472A and also holds substantial interest fn four
businesses which are tenants in the building this
section is not violated where the city acquires
the councilman's pcoperry by eminent domain
proceedings. Op.Atty.Gen. 59-a-29, March B,
1976.
School district may, in the exercise of emi-
nent domain, acquire land, which is owned by a
member of the school board, for a new school
site. Op.Atty.Gen. 9D-C-8, 7uly 14, 1955.
29. Limnses
Unless city ordinance provided for the giving
of a bond in connection with a license to se113.2
beer, or for some other contractual relation,
there was no legal objection to a councilman
holding a 3.2 beet license. Op.Atty.Gen.
96-E-4, Aug. 18, 1949; Op.Atty.Gen. 90.E-4...
Aug. 15, 1949.
Council of ciry ,which had a charter providing ~•
that no city officer shall make any contract iu..
Ms official capacity if he is duecdy or fndireidy{
interested in the contract as an individual, muld~:,;
issue a nonfntaxicating liquor liceme to a pzi`f-`
nership of which alderman was a tnember,-bo~'
alderman could not vote on question of issuzrilt~
of license. Op.Atty.Gen. 90-L:rl, Dec. 6, 195.
A city may issue a public dance hall licens4. .
member of city council. OP.Atty,2,i
802-A-17, Nov. 18, 1952.
A public dance hall license or permit is h}dL~'~
contract within meaning of law which Prohl6
council member Erom being interested iii ti; ~.
tract with city. Op.Atty.Gen. 802-A-17;"
Sept. 24, 1951. 18, 1952.
1.
471. Exceptions
Sub vision 1. Coverage. The governing body of any port authority,
port authority, economic development authority, watershed district,
'll water conservation district, town, school district, hospital district, co
II city, by tmanimous vote, ma contract for goods or services with an in
tl officer of the government unit in any o e o owing cases.
MUNICI
Subd.
savings a
ry for pu
the depot
such auf
Wh1Ch a I
interest i1
provided,
disclose i
associatic
or govern
associatic
when suc
shall serv
n-ansactic
Subd.
publicatic
is the onl
ing to the
Subd. <
lion of wl
manager.
Subd.
bids are .
Subd. F
volunteer
for the pa:
Subd. 6
for the
Subd. 7
r the pa.
Subd. 8
Subd. 9
tT
rates a
ll not v
Subd, li
commii
in the
~~~ ls~~ ~1~~,h1~ ~t~tv~. ~~
1LITIES
m admin-
and is aot
teasing of
as authar-
is author-
uiking any
d capacity
1 financial
ntract' or
tder. Op.
interest in
td demoli-
ict project
lions of c.
est in four
ulding this
y acquires
rt domain
March 8,
.e of emi-
uo3ed 6y a
school
the giving
to sell 3.2
I relation,
tuncihnan
~.Atty.Gen.
90-E~,
providing
mtract in
indirectly
ual, mould
to a part-
mber, but
f issuance
6, 1955.
license to
Atry.Gen.
i[ is not a
prohibits
in a con-
-17, Nov.
seaway
oil and
mty, or
erested
MUNICIPAL
-~.1 ~y~~a~- l~yvt i5 /~~ ~~~
POWERS, DUTIES' ~Ob/~~i /"d ~~~ 471.88 ~s1r~~~
Subd. 2. ank or savings association. In the designation of a bank or
savings also iation in which the officer is interested as an authorized deposito-
ry for publi funds and as a source of borrowing, no restriction shall apply to
the deposit r borrowing of any funds or the designation of a depository by
such author ty or governmental unit in any bank or savings association in
which a me ber of an authority or officer of a governmental unit shall have an
interest if su deposited funds are protected in accordance with chapter 118A;
provided, ho ever, that any member or officer having such an interest shall
disclose that a member is a director or employee of the bank or savings
association, w ich disclosure shall be entered upon the minutes of the authority
or government unit, such disclosure shall be made when such bank or savings
association is st designated as a depository or as a source of borrowing, or
when such me er or officer is elected whichever is later, and such disclosure
shall serve as no 'ce of such interest and need not be made with each successive
transaction.
Subd. 3. Offi 'al newspaper. The designation of an official newspaper, or
publication of offi ial matters therein, in which the officer is interested when it
is the only newsp er complying with statutory or charter requirements relat-
ing to the desigriat nor publication.
Subd. 4. Coop alive association. A contract with a cooperative associa-
tion of which the fficer is a shareholder or stockholder but not an officer or
Subd. 5. Contract with no bids requfred. A contract for which competitive
bids are not required by law.
Su . 6. ontract wit vo unteer fire department. A contract with a
volunteer fire department for the payment of compensation to its members or
for the payment of retirement benefits to these members.
Subd. 6a. Contract with volunteer ambulance service. A contract with a
volunteer ambulance service for the payment of compensation to its members
or for the payment of retirement benefits to these members.
Subd. 7. Contract with munfcipal band. A contract with a municipal band
for the payment of compensation to its members.
Subd. 8. Repealed by Laws 1992, c. 380, § 8.
Subd. 9. Import, export, trade; port commissioner. When a port authority
commissioner or economic development authority commissioner is engaged in
or employed by a firm engaged in the business of importing or exporting or
general trade, it shall be lawful for the authority to do business with the
commissioner or the commissioner's employer provided that in the fixing of
any rates affecting shippers or users of the terminal facility, said commissioner
shall not vote thereon.
Subd. 10. Import, export, trade; seaway port. When a seaway port author-
ity commissioner is engaged in or employed by a firm engaged in the business
of importing or exporting or general trade, it shall be lawful for the authority to
do business with the commissioner or the commissioner's employer provided
that in the fixing of any rates affecting shippers or users of the terminal facility,
623
.ITIES 1, MUAfICIppI, BIGHTS, POWERS, DUTIES
t village
sge, and
then pa. .
vspaper, ;
t of the
ublis6ed
1 by law
mayor
uthoriu
material
2776-1,
sed by
vich a
mer but
+ed, the
to value
Op.Atry.
thibited
az offi-
he was
;age on
of own-
uly 25,
of cor-
aper in
mani-
dishing
seek to
in the
:, Sept
depen-
te only
ct had
spaper
boazd,
i each
.t was
r, who
fired [o
;e vote
v. 19,
volved
m un-
it city
bank.
W.2d
eanor
unty's
ad no
ounry
igna4
ed by board of auditors az county depository,
did not prevent bank Crom becoming de jure
depository. Marshall County v. Bakke, 1930,
Mme- 10, 234 N.W. 1. Counties ~ 102;
Deposits And Escrows ~ 31
loss~ety for school treazurer was not liable for
of w rough failure of de facto depository bank,
hick treasurer was officer. School Dist.
No. 1, Itasca County v. Aiton, 1928, 173 Minn.
428' 217 N.W. 496. Schools ~ 63(4)
Cashier of one of two depositories available to
the city could file Eor the office of city treasurer
where the cashier was not a stockholder of the
6~, had no voice in the management of the
dent and whose compensation was not depen-
Gen.; 9p~n new business or profits. Op.Atty.
E-2, March 18, 1963.
Member of a hospital board controlled, man-
aged and operated by the city would be a public
officer within the terms of § 471.87 and N view
§ 471.89
of this hospital could not deposit Eunds in the
bank of which the board member was president
and held stock. Op.Atty.Gen., 90e-2, Nov. 23,
1960.
A county treasurer could act az a direcmr of a
national bank in his counTy wherein counTy
deposited Cunds. Op.Atty.Gen.1940, No. 114, p.
158.
12. Dog kennels
Whether arrangement, whereby village coun-
cil trustee and member, who owned dog kennel,
and who was licensed dogcatcher for several of
surrounding communities .outside village,
charged village dogcatcher for use of dog ken-
nel fell within any of the exceptions enumerated
in this section is a Eact question to be deter-
mined by Village Council. Op.Atty.Gen.,
90-A-1, Feb. 9, 1955.
471'$$1. Exceptions; application
The exceptions provided in section 471.88 shall apply notwithstanding the
provisions of any other statute or city charter. ~~''~i~
Laws 1967, c. 18, § 1, eff. Feb. 25, 1967. I l t17 ~7 y/.~, e ~~
Library References ~1' ~J ~ "~ f ~ I r` ~
Municipal Corporations o=78, 79.
Westlaw Topic No. 268. ~-/ -(J~(1,f 1 ~.
C.J.S. Municipal Corporations § 193. 1 VVV
Notes of Decisions
Bankg 1
Town boards 2 also a counTy commissioner. .Atty.Gen., 906,
May 28, 1968.
t• Banks
own `new of the fact that this section applies
Y to subds. 2 through l l of § 471.88, but not
to subd. 1 of § 471.88, a county could not
Po perly designate a hank as a deposito of
utity hinds when a director of the bank was
2. Town boards
General prohibition f § 365.37, that a mwn
board may not co act with one of its own
members is rende d inapplicable by § 471.81
to contracu w ' h meet the requirements of
§ 471.88. Op tTy.Gen., 322a-2, Ott. 4, 1968.
471.89.
~...utvls n 1. Procedure
471.88, s division 5, is v~ oid
and 3 is Fo nu.n
contract made pursuant to section
cedure prescribed by subdivisions 2
~ubd. 2, Resolution by governing body. Except in an emergency making
such procedure impracticable, the governing body of the governmental unit
shall authorize the contract in advance of its performance by adoptine a
or lower
contract
~6
i
i
i
case of an ewer en a contract cannot
629
~~ ~5~~ ~~~~~~ ~I~ ~>~~~
§ 471.89
authorize a vance, payment of the claims sha1Z'beapthotized by a like
re on in which the }#~gency aze also stated.
Subd. 3. Cla' s atlldavtts filed. fore such a claim is paid, th terest-
ed officer shall o the governing body an affidavit s ling:
(a) The name of the officer and the office held by the officer;
(b) An itemization of the commodity of services furnished;
(c) The contract price;
(d) The reasonable value;
(e) The interest of the officer in the contract; and
(f) That to the best of the officer's knowledge and a the contract price is
as low as, or lower than, the price at which ommodity or services could be
obtained from other sources.
MUNICIPALITIES MUNICH
Laws .379, § 3. Amended by Laws 1965, c. 45, §§ 64 to 66, eff. Feb. 28, 1965;
Laws 1967, c. 125, §§ 1, 2; Laws 1978, c. 651, §§ 2, 3, eff. Mazch 29, 1978; Laws 1986,
c. 444.
Historical and Statutory Notes
Laws 1965, c. 45, §§ 64 to 66, was a correc- governmental unit within 35 miles of the seat of
tion bID in which "subdivision 5" was substitut- government of the govemmental unit.
ed for "clause (d)" in Subd. 1; and the phrase The 1978 amendment in subd. 2, deleted "and
"within 35 miles of the seat of government of that the commodity or service cannot be other-
the government unit" was added to Subd. 2 and wise obtained in the affected governmental
"
"
"
to clause (g) of subd. 3. obtained elsewhere
; and i¢
following
unit
"
sssbd. 3, deleted clause (g) which read:
Chat to
_ The 1967 amendment substituted 'tommodi- the best of his lmowledge and belief the com-
ty" for "property' m subd. 2 and "commodiTy" modiTy or service cannot be otherwise obtained
for "goods" N subd. 3 deleted the provision in in the affected governmental unit"
~'. subds. 2 and 3 requiring that the commotliTy or The 1986 amendment authorized the removal
service not be obtainable m any contiguous like of nonsubstantive gender specific references.
1%
~'
'
Cross Refemnces
C`
'
..
Statutory cities, council members, see § 412.311.
~ Towns, interest of supervisors in contracts, see § 365.37.
Library References
Counties e=111(2). GJ.S. Counties § 150.
Municipal Corporations a~231. C.J.S. Mutucipal Corporations §§ 906 to 908.
Schools c580(1). C.J.S. SrLools and School Districts §§ 406 to
Wes[law Topic Nos. 104, 268, 345. 408, 415 to 416, 435, 443, 761. '
- Notes of Decisions
Charter provisions 1 Where municipal band director of New slim -',!
Emergenry services 2 operated music store, contract for pmchasd of y'=i
musical instnunents requisitioned by president ~~%
`'
'.':
of baud through city council from band direc[od
would ¢ot be prohibited under city charter.'
1. Charter revisions
P Op.Atty.Gen., 90.E-5, Dec. 31, 1951. -sd'x
City charter provisions relating ro interest of -:~rt
its officers in contracts are subject to the provi- 2. Emerge¢ry services ?.
s
sions of this section. Op.Atty.Gen., 90.E, May if flooding of basements of private homes wa
4, 1954, occasioned by unusual or unprecedented r
630
fall and cm
gation or dt
'~ the basemen
[O pay a da
471.895.
Subdivi
this sectio
(b) "Gil
(c) "In[
association
is authori:
(d) "Lot
or of an at
Subd. 2
another to
from an in
Subd. 3.
gift 1S:
(1) a CO]
(2) servi
ing but no
nica[ion in
(3) servi
(4) a pia
specialty o:
(5) a trir
(6) infor
(7) food
recipient's
to make a s
(b) The I
(1) becat
members a
other meml
(2) by ar
unless the
family; Or
(3) by a 1
public offic
public fiord
s us.c. §§ Isoza; The extent to which a city can wntrol the political activities of its employees
Minn. star. § n te.o9. is unclear. State law prohibits public employees from using their official
authority or influence to compel a person to apply for membership or become
a member of a political organization, to pay or promise to pay a political
contribution, or to take part in political activity. State law also prohibits a
political subdivision from imposing or enforcing additional limitations on the
political activities of employees.
nsam. r. r~r. However, the Minnesota Supreme Court has held that a county could adopt a
cn~y.4sa rl.w.za
3fi8 (Minn. 1989). policy to require employees to take an unpaid leave during a political
candidacy. The court also held that a county employee who was a candidate
for a county office had no due process right to a hearing before being placed
on unpaid leave.
Minn. Star. S 43A.32; 5 The court reasoned that a local government has an interest in prohibiting
as.c. §§ not-z; s government employees from certain political activity. As a result, a
U.S.C. ¢ 7124.
legislative body could prohibit a government employee from becoming a
candidate for elective office to prevent potential conflict in the workplace
between the employee and the supervisor-incumbent during the campaign,
and also to prevent any coercion of fellow employees and subordinates to
assist in the political campaign. For these reasons, the court stated that a local
government could suspend, or even discharge, a government employee who
seeks elective office.
Minn, Stars. §§ It is important to note that the court did not discuss whether such a policy
ton.zo, snM. 11; may also be applied to the incumbent who was rluming for re-election. The
2118.09-.10: IS U.S.C.
§§ fi00-601; 5 U.S.C. §
court also did not consider several statutes that appear to limit the restrictions
Iso3. employers may impose on their employces' political activities. Cities should
exercise caution when adopting a policy to regulate the political activities of
employees.
Part III. Conflict of interest
in contracts
G. All cities
1. In general
onion. star. § an sr Generally, public officers may not have a personal financial interest in a sale,
lease or contract they are authorized to make in their official capacity. A
"public officer" certainly includes a mayor, a councilmember or an elected
official. In some circumstances, the designation may also include appointed
officers and employees who are able to influence contracting decisions.
v~ 1, ~ `r~~t M
om~lal conmet nrmlerest is
a.c. op. 9a~s (Nov. The attorney general has advised that the conflict of interest law applies to
13, 1969>; A.c. op. any councilmember "who is authorized to take part in any manner" in the
90e-6 (Jwe 15, 1988).
making of the contract. Simply abstainine from voting on the contract will
tallow the contract to be made. The attorney general reasoned that if the
Legislature had on y wanted to prohibit a contract with an interested officer
who votes on the contract, it would not have used the word "authorized."
A.G. Op. 90e-fi (June A literal reading of the statute might suggest that it does not apply to city
is, l9aa). officers who are unable to make a contract on behalf of the city. However,
the attorney general has given the statute a broad interpretation, which could
mean the statute affects more officials than just those who actually make the
decision to enter into the contract. As a result, it may be wise to take a
conservative approach regarding contracts wi any city official.
A.c. op. a7o(lune9, The clerk th a Standard Plan statutory city, or in a home mle charter city
i 9fi~). having a similar plan of government, is a member of the council but occupies
a peculiar position. He or she is subject to the conflict of interest stamtes and
may not be interested in a contract with the council. However, the council is
allowed to impose duties on the clerk in addition to those assigned by statute,
and the council may fix the clerk's compensation for those duties.
2. Exceptions and the procedures to use them
Minn. star S arl.aai. There are several important exceptions to the conflict of interest law on
contracts. These exceptions apply to all cities, despite any other statutes or
charter provisions.
Minn. Stet. §-071.88, Generally, an exception may only be used when approved by unanimous vote
su6d. I; 1989 Street of the council. In the past, it has been unclear whether this meant an
Imprmemem Progrom
e. fhnmark rmvn:mp,
interested officer should vote or abstain. However, a 1992 decision by the
483 N.W.2d 508 Minnesota Court of Appeals suggests that an interested officer should abstain
(Mi""' app. t 99z). from voting even when not expressly requtr- ed o of d so under the law.
/9a9 street The case dealt with a local improvement that was to be paid For with special
Improvement Program
v. Denmark TowntRip, assessments. Two members of the town boazd owned properties that would
aa3 N.w.za sos be specially assessed. The two interested boazd members abstained from
(Minn app 199s) voting on whether the improvement should occur. The remaining three boazd
members approved the project. The township was challenged because the
project had not received the required four-fifths majority vote of the board.
However, the court said the two interested board members were correct not
to have voted on the project since their interests disqualified them from
voting. As a result, the remaining three board members' votes were sufficient
to unanimously approve the project.
see Part lv-E- Aninterested officershould disclose his
Conflict ojimereat
cReck liaf. an a stain from voting or e i eratine on any contract in which he ~• ~tiP
` Illtere5[. 1 rte renl`8mner OI IOe COUnCII must I1r1anImOU51y appfOVe the
--- ~fc .'iT~ere are also a~onTa requuement~or same of the exceptions
-' t of tare discussed below.
i6 League of Minnesota Cities
Minn. sat. § 471.88, • A conrrgci jor goods or services ijcompetitive bids are no! requbed by ~~ `~
SOS 5' law. Generally, a city must use competitive bidding if the amount of a
\
Minn. star. § 4n.3a • ~
contract for the sale, pwchase or rental of supplies, materials or
see tsagae researc
memo CamperlrNe a ui ent or for the construction, alteration, re air or maintenance of
q l~ p
B7Cding Bequrrcm v 'real or personal property is more than$r59;BBt~^ A ]or. ~ ~ ~ (7~ ~ ~
J_"°_ /
in Cifies (130B1.3) r ~
more information. ~
see Fen v - This exception appears to apply to contracts that do not have to be
fncomparlbi7iry of
offices. competitively bid, like contracts for professional services or employment. A
city may want to seek a legal opinion if it is unswe about whether this
exception applies to a particular situation.
Mann. smt. §§ 471 ss, Procedure. The following must occw to use this exception:
subd 5; 471.89.
i. The council must approve the contract by unanimous vote.
~---_
see Forms 1 and 2 for ii. The interested officer should abstain from voting on the
sample resolutions. matter.
iii. The council must pass a resolution settin out the essential
facts, such as the nature o e o rcer's interest and the item
or service to be provided, and stating that the contract price
is as low or lower than could be found elsewhere.
See Form 3 for sample iv. 'm is paid, the interested officer must file an
~~~'t' affidavit wi the clerk that contains the following:
• The name and office of the interested officer.
• An itemization of the commodity or services
famished.
• The contract price.
• The reasonable value.
• The interest of the officer in the contract.
• That, to the best of the officer's knowledge and
belief, the contract price is as low or lower than the
price that could be obtained from other sources.
Minn. sra~. § 471 s9, v, [n the case of an emergency when the contract cannot be
°~ z. authorized in advance, payment of the claims must be
see Forma z and 3. authorized by a resolution (see above) in which the facts of
the emergency are also stated.
tg League of Minnesota Cities
Procedure. The following must occu to use this exception:
i. The grant must be for hous' g, community, or economic
development.
ii. The interested officer m t abstain from voting on measures
related to the grant.
Minn. Star. § 471.88, • Loans or grants jram certain jede al funding programs that benefd
subd. Is. officers ojsmall cities in SL Lou' County.
Procedure. The following m st occur to use this exception:
i. The city must have population of 5,000 or less and be
located in St. Loui County.
ii. The city must be ministrating a loan or grant program with
community dev opment block grant funds or federal
economic Bevel pment administration funds for property
owners in the c ty.
iii. The officer re eiving the loan or gmnt must disclose in the
official minu s that they have applied for the funds.
iv. The interest d officer must abstain from voting on the
Minn. Stat. §471.88, • A loan jram an HRA !o an HRA ojfecer.
su6d. 19.
Procedure. The ollowing must occur to use this exception:
i. The to must be from state or federal loans or grants
admin' tered by the I IRA.
ii. The blic officer must first disclose as part of the official
min es that they have applied for the funds.
iii. Th public officer must abstain from voting on the
--____ H. Statutory cities
Mlnn. scat. g atz.311. Statutory cities must consider an additional law. The law provides that no
member of a statutory city council may be directly or indirectly interested in
any contract the counct m es, excep or a tmtte exceptions tscuss
previous y. is aw may apply to some situations where the general law
does not. For example, even though the actual contract is not made with a
councilmember, the fact that he or she has an indirect interest in it could
violate this law.
.~--
1. Home rule charter cities
omeal come unmerot zt
Mmn. sloe 44n,ee1. Many home rule charters contain prov' o on conflict of interest in
contracts, Some of these go beyond fatale to include any city official,
even though the official has no part' making the contract. These charter
provisions may apply to situatio where the statute does not. However, the
exceptions discussed previous apply to all cities, despite any other statute
or city charter. (Because ch er provisions vary from city to city, they are
not covered in this doe nt.)
Some home rule ch ers contain provisions preventing all officers and
employees from ing interested in a contract with the city. Such a provision
evidently appli to every city officer or employee whether or not he or she
has a part i eking contracts.
J. Specific kinds of contracts
A.G. Op. 90a-2 (April The unlawful interest statutes apply to all kinds of contracts fo I
14,1960); A.G.Op. jnformal, for goods and services. The statute a Iles not onl when the ci rs
90E-6 (Aug. 30, 1949). pp y ty
the buyer, but also when the city is the seller.
1. Prohibited interest
A.G. Op. 90E-1 (Mey The law would appear to prohibit a contract with a public official who has
12.1976). ~_~.~_ ____~._-~.._ -_n--____.~_._-_ _ra_ ___._.__. __z_ 3__._.__ .r-~
the goveming body.
Minn. smr. g a7 tss, Even when a contract is allowed under one of the exceptions_such as fora
:uta. s. "contract for which beds are not required by law" (which appears to include
sec pan v • an employment contract), council members should be coati ._Employing a
lncompmibifiry of councilmember as a city emp oyee may still be prohibited under the
a$sea.
"incompatibility of offices" doctrine.
A.c. op. 9oa-1 (May The attorney general has advised that a councilmember who holds stock in a
16.19sz>. corporation that enters into a contract with the city has an unlawful interest
A.c. op. got (Ang. s, and that a councilmember who is a subcontractor on a contract has an
1969). unlawful interest. The attorney general has also advised that a member of a
goveming body that receives a percentage of the money earned by a court-
reporting firm for jobs done under a contract with the city has an unlawful
interest.
A.G. op. 9a><s (Nov. On the other hand, the attorney general has advised that if a councilmember
t 3, 1969). is an employee of the contracting firm and his or her salary is not affected by
the contract, the council may determine that no personal financial interest
exists. Thus, such a contract may be made and enforced in a home rule
charter city with no charter provisions prohibiting direct or indirect interest.
sngewdev. The Minnesota Supreme Court has held that employment by a company the
Afirnrapo(;a ca= co.,
274 Minn. 556, 142 ci wntracts with ma rve a councilmember an indirect interest in the
ty Y g
N.W.2d 739 (I966), contract. However, a more recent attorney geneml opinion concluded it is
A.c. op.9oa-1(x1.7, uncleaz whether mere employment always gives rise to a conflict of interest.
1976).
E2 League of Minnesota Cities
A.c. Po. 9oa-1(oa. r, The attomey general has said that factors other than employment may have
19761' to be considered to detettnine whether a prohibited interest is present. The
attorney general concluded that a council may conbact with a
councilmember'samployer if the following criteria are met:
• The councihnember has no ownership interest in the firm.
• The councilmember is neither an officer nor a director.
• The councilmember is compensated with a salary or on an hourly wage
basis and receives no wmmissions, bonus or other remuneration.
• The councilmember is not involved in supervising the performance of the
contract for the employer and has no other interest in the contract.
More difficult questions sometimes occur when a councilmember takes
office after a city has entered into a contact. If no conflict of interest can
develop between the councilmember's public duty and his or her private
interest in the contract during the contract, the councilmember can probably
serve. However, if a conflict of interest can develop, the interested member
may be prohibited from serving on the council. The attomey general haz
issued mixed opinions concerning the legality of these types of situations.
A.c. op. (April 1, In an informal letter opinion, the attorney general said the director of a
1975) (informal totter
opinion). maltin corn an could assume office az a councilmember even thou h the
g P Y g
city had entered into a 20-year contract with the company to allow it to use
the city's sewage disposal plant. The contract also fixed rates for service
subject to negotiation of new ales under certain circumstances. The attorney
geneal said the councihnember could continue to serve as long az no new
negotiations were required. However, no new agreement could be entered
into az long az the interested councilmember held office.
A.G. Op. 9nE-1 (May The law apparently prohibits makin a contract with an u
12, 1976). - a e opportunity to influence its terms. The attomey geneal has
advise t at a ormer counci em er cool not be a subcontractor on a
municipal hospital contact if he was a councilmember when the prime
contact was awarded.
A.G. Op. 9De-1 (March However, in a different opinion, the attomey general advised that a
ro,196)1. councilmember was eligible for city office even though the councilmember
was entitled to commissions on insurance premiums payable by the city. In
this instance, the insurance contact was entered into before the person
became a councilmember.
The azsumption of office by someone with a personal financial interest in an
already existing contact raises concerns about possible conflicts of interest
during the performance of the contract. In doubtful cases, the person faced
with a possible conflict of interest situation should seek a legal opinion
before assuming city office.
2. Employment of elected official by city
Omrial Cannid of I•temt 2;
Part VI. Mod i forms
- Form 1
Model resolution to ntract with a councilmember
(under Minn. Stat. §§ 471.88, subd. 5 and 471.89, subd. 2)
Whereas, the city of desires to purchase the following (goods /merchandise / eouiament /
services): (describe in detain;
Md Whereas, (name o interested o tcian is the (oNrce held by interested o ctall of the city and will be
financially interested in the contract;
Md Whereas, it is determined that the contract price of $ is as low as, or lower than, the price at
which the goods can be obtained elsewhere at this time;
Md Whereas, the contract is not one that is required to be competitively bid;
Now be it resolved by the city of ,Minnesota that the city clerk is directed to make the
above-mentioned purchase on behalf of the city from (name of interested officer) for a price of $
[t is also resolved that the mayor and city clerk are directed to issue an order-check to pay the claim on
the filing of an affidavit of official interest by the interested official as required under Minn. Stat. §
47 L89.
This resolution is passed to comply with the provisions of Minn. Stat. §§ 47].87-.89.
Passed by unanimous vote of the city council on (dav and date).
Mayor
Clerk
Otadal t.oaaict of loterot 7B
Form 3
Model affidavit fficial interest in claim
un t §§ 471.88, subd. 5 and 471.89, subd. 3)
STATE OF MINNESOTA
COUNTY OF )
I, (Name ofinterested ofTcer), being duly sworn state the following:
1) I am (office held 6v interested o tcial) of the city of Minnesota.
2) On (dav and dare), the following (YOOds /merchandise /equipment /services) were furnished by
(name of business or individual with whom the contract was made) to the city of : (s eci
the tune of2oods. merchandise. equipment. or services that were ourchasedl.
3) The wntract price for such (AOOds /merchandise /equipment /services) was $_ and their
reasonable value was $
4) At the time such (1;oods /merchandise /equipment /serviced were famished to the city, I had the
following personal financial interest in this contract: ~ecifv the nature of the personal frnancial
interest
To the best of my ]mowledge and belief the contract price is as low as, or lower than the price at which
the (hoods /merchandise / egrt~ment /services) could be obtained from other sources.
I further state that this affidavit constitutes a claim against the city for the contract price, that the claim is
just and correct, and that no part of the claim has been paid.
Lignature ofinterested o tcia!)
Subscribed and sworn to before me this day of month ear .
/signature ofnotarv)
Omelai Convict of loterest q,
G( ~Jl"PnNI-Q~Vcj
§ 2-131 / ELK RIVER CODE
Of~lcial includes all elected and appointed offi-
cials of the city, including but not limited to the
city council, the economic development authority,
and the members of the boards and commissions
established by this Code.
(Ord. No. 99-33, § 2(220.04), 12-20-1999)
Cross reference--Definitions generally, § 1-2.
Sec. 2-132. Intent of division; conflicts of in-
terest prohibited.
The credibility of the local government rests
heavily upon the confidence which citizens have
in public officials and employees to render fair
and impaztial services to all citizens without
regazd to personal interest and/or political influ-
ence. Thus, city officials and employees must
scrupulously avoid any activity which suggests a
conflict of interest between their private interests
and city responsibilities. Officials and employees
of the city, or their family members, shall not
engage or have financial interest in any business
or other activity which could reasonably lead to a
conflict of interest with the official's or employee's
primary city responsibilities. Family members of
an official or employee shall be deemed to be the
official's or employee's spouse, pazents, children,
siblings, father-in-law, mother-in-law, brothers-in-
law, and sisters-in-law and the lineal descendants
of any of them. Examples of activities which are
not in accordance with this policy include, but aze
not limited to, the following:
(1) Entering into any sale, lease, or contract
in violation of Minn. Stats. §§ 471.87-
471.89•
(2) Acceptance by a local official of any gift
from an interested person in violation of
Minn. Stats. § 471.895;
(3) Activities which require the official or
employee to interpret city codes, ordi-
nances, or regulations which such activity
involves matters with which the official or
employee has business and/or family ties;
(5) Using an official's or employee's author-
ity, influence, or city position for the paz-
pose of private or personal financial gain;
(6) The use of city time, facilities, equipment,
or supplies for the purpose of private or
personal financial gain;
(7) Entering into a business transaction when
it involves using confidential information
gained in the course of employment;
(8) Accepting other employment or public of-
fice where it will affect the official's or
employee's independence of judgment or
require use of confidential information
gained as a result of city duties;
(9) Conducting personal business while work-
ing regularly scheduled hours; and
(10) Accepting rebates or procuring any finan-
cial gain through the bidding process or
employment of outside personnel.
(Ord. No. 99-33, § 2(220.00), 12-20-1999)
Sec. 2-133. Enforcement.
Any official or employee engaging in any activ-
ity involving either an actual or potential conflict
of interest or having knowledge of such activity by
another official or employee shall promptly report
the activity to the city administrator, or, if such
activity be by the city administrator, to the mayor.
The city administrator or mayor shall investigate
the matter and make a determination as to whether
or not an actual or potential conflict exists. If the
city administrator or mayor determines a conflict
exists, it shall be presumed that the continuation
of the practice would be injurious to the effective-
ness of the official or employee in carrying out his
duties and responsibilities. In such cases the
official or employee shall immediately terminate
the conflicting activity ar be subject to termina-
tion of employment or removal from office.
(Ord. No. 99-33, § 2(220.02), 12-20-1999)
(4) Consulting activities carried out within
the city if such consulting involves talents
or skills primarily related to the official's
or employee's city work responsibilities;
Supp. No. 17 CD2:10